The state appeals court last week decided that a Washington Township couple should partially or fully rebuild their $1.1 million mansion to comply with a deed restriction, the latest development in a seven-year neighbor dispute.

The court also acknowledged the extreme nature of that resolution - tearing down part or all of a 9,000-square-foot, custom-built home - and encouraged the two parties to strike a deal to avoid it.

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“While it appears from the record that plaintiffs are unlikely to reach a compromise with defendants that will allow defendants to maintain their home as it currently exists, such a compromise would perhaps best serve the interests of each of the parties,” a panel of three judges say in the unanimous Feb. 14 decision.

The case has a long, legally eventful history, the subject of a trial and an evidentiary hearing.

Gerald and Aileen Thom sued Simon and Saca Palushaj in August 2004, contending their new neighbors’ planned $1.1-million home in the upscale Lockwood Hills subdivision violated setback requirements in deed restrictions enforced by the homeowners association. It was built 80 feet from the Thoms’ home instead of 100 feet, and 28 feet from the side property line instead of 40 feet.

The COA overturned visiting Judge Kenneth Sanborn several years ago and remanded the case to a second judge, James Biernat, who in late 2010 ordered the Palushajes to pay $184,000 in costs and legal fees to the Thoms, and the Palushajes to maintain $40,000 worth of landscaping as a buffer between the two homes.

But the Thoms appealed in December 2011.

The panel opined last week that Biernat should have issued an injunction to correct the violation and should not have “balanced the equities” by awarding money and making the order, based on precedence.

“(Biernat) determined that (he) had the discretion to balance the equities and consider the hardships of the parties when crafting its remedy,” the court says. “We cannot find legal support for that conclusion.”

The Thoms’ attorney, Thomas Kalas, said Friday he was not surprised with the ruling because courts have already determined deed restrictions are legally enforceable.

“These are not new or novel issues,” he said. “Deed-restriction law is pretty much settled. You have to abide by them.”

But the technical remedy, razing the palatial abode, not only would be unique but an extreme hardship and expense for the Palushajes, said their attorney, Joseph Viviano, whose remarks also demonstrate the bitterly personal nature of the court battle.

“The demands made in this case are not anything a sane person would consider,” Viviano said Friday. “The personal and financial devastation caused by this if not corrected speaks for itself.

“This case, for a long time, has not been about justice but about inflicting pain, vindictiveness and spite.”

The Palushajes say the cost to fully or partially knock down and rebuild the house is not financially feasible, especially since the home was specially built with an elevator and other tweaks to accommodate a son who has cerebral palsy and uses a wheelchair. The couple has five other children.

“The human aspect of this case is terrible,” said Viviano, adding that if the Palushajes are forced out of their home they may not be able to properly care for their son.

The two sides have talked but have been unable to reach a settlement that avoids a demolition.

“We’ve tried to compromise all along, but he (Simon Palushaj) has not been reasonable,” Kalas said. “My clients have over $200,000 into this case, and he hasn’t offered anything close to that. It’s tough to resolve when the other side is unreasonable.”

Kalas said the case has caused “stress and aggravation” for the Thoms.

“They’re retirees,” he said. “It has taken a toll on their finances and emotional health.”

Kalas did not provide a potential settlement figure, but said the Thoms would like to be fully reimbursed for their costs - at least $220,000 - as well as compensation on top of that.

Viviano said the Palushajes want too much. Asked if he believed the Thoms would accept a $300,000 offer, Viviano said, “I don’t think they would take that.”

He said the Palushajes have made generous offers to buy the Thoms’ home, which is about one-third the size and value of the Palushaj home.

“My client would buy the home at a substantial premium, but what they’ve asked for in the past is crazy, no one would pay,” Viviano said.

The Palushajes can’t understand the Thoms’ position because the Palushajes believe their home has little if any effect on them. Due to foliage, their structure is barely visible from the Thoms’ home. A windowless side of the Thoms’ home faces the Palushaj home. The Thoms didn’t even know the Palushajes had a disabled child despite him being picked up daily by a van in front of their home until learning about him in court.

“Everyone agrees they have suffered no hardship,” Viviano said.

Aileen Thom testified at a 2009 evidentiary hearing the harm to them has been “immeasurable,” and has said, “A rule is a rule.”

Viviano repeated trial arguments, that the subdivision did not enforce deed restrictions. A survey of 66 of 79 lots in the subdivision found violations on 36 lots in the subdivision off Mound Road between 26 Mile and 28 Mile roads, he said. The subdivision association, which enforces the restrictions, was hardly even in existence at the time, according to some residents.

But Kalas reminded why the Thoms originally filed the lawsuit - Simon Palushaj’s apparent arrogance. When Palushaj, a business owner, started the construction, the Thoms approached him and said the design appeared to violate deed restrictions. Palushaj ignored the warnings and proceeded with the construction, even after the lawsuit was filed and a judge advised him to continue at his own risk.

“This has never been about money,” Kalas said. “He (Palushaj) kind of set the tone. He thumbed his nose at them and proceeded to do what he wanted to do.”

Viviano, however, said Palushaj discovered that the association was not enforcing deed restrictions.

“The claim that he acted arrogantly is just fiction,” he said.

By the time the Thoms mentioned deed restriction to Palushaj, he had invested a large sum of money in the design and initial construction costs, Viviano said.

The couple also was “desperate” to have the house built as soon as possible to care for their son, he said.

Viviano reiterated that the Palushajes’ home has actually increased the value of the Thoms’ residence. If the Palushajes demolished their home, “their home value would go down,” he said. Car dealer Tony Viviano, who is not related to Joe Viviano but who lives in the subdivision, testified for the Palushajes in 2009 that the home added value to the neighborhood.

Viviano said the Palushajes likely will seek an appeal of both COA rulings to the state Supreme Court and have 42 days from Feb. 14 to file.

Kalas said this week he will seek an “entry of order” from circuit Judge Matthew Switalski.

Kalas predicted the high court will not accept the appeal.

In asides, the case has dragged on so long that Viviano pointed out with a chuckle, “I’ve had three kids since it started.”

Kalas, tongue-in-cheek, referenced when the case started, “We were young men in our 20s. I wish I could go back to that day (the day the lawsuit was filed).”

And it was Viviano’s brother, David, now the chief judge of Macomb Circuit Court, who first represented the Palushajes and participated in the first trial but since passed it to Joe.